- Binance has said that a bug in an institutional trader’s algorithm was behind a 87% Bitcoin flash crash on Binance US
- The Bitcoin price crashed to $8,200 and sprang back up in less than a minute yesterday
- The price crash wasn’t reflected on other exchanges
Binance has claimed that a bug in a trading algorithm belonging to an institutional trader was behind the 87% flash crash that yesterday saw the Bitcoin price on its Binance US exchange drop to $8,200. The incredible flash crash occurred at 7:30 yesterday and was resolved within one minute, with other exchanges remaining unaffected, showing that the volume was nowhere near enough to have an impact on the overall price. Binance said that the institutional trader had contacted them to say that its algorithm was at fault but that the issue had been resolved.
Twitter Muses Over Binance US Flash Crash
As usual, those first on the scene of the crash were crypto Twitter users, who quickly reveled in the extraordinary red candle:
Well done Binance US. pic.twitter.com/OgGiblrdI8
— Crypto Chase (@Crypto_Chase) October 21, 2021
OH MY LADY GAGA !!!! wtf is this pic.twitter.com/pUsPlPrFkD
— Feras_Crypto (@FeraSY1) October 21, 2021
Given that the 87% selloff didn’t happen on other exchanges, any fears over a market-wide collapse were dispelled, leaving onlookers to puzzle about the cause. Binance US themselves didn’t reference the flash crash, and at the time of writing still haven’t done so, with the explanation only coming through comments made to Bloomberg:
“One of our institutional traders indicated to us that they had a bug in their trading algorithm, which appears to have caused the sell-off. We are continuing to look into the event, but understand from the trader that they have now fixed their bug and that the issue appears to have been resolved.”
It’s not clear whether the incident affected leverage traders who would have all been stopped out in the minute-long candle or if anyone was able to scoop up a bargain given how thin the Binance US orderbook must have been to allow such a crash. If leverage traders were stopped out by the crash it is yet another example of why regular traders should avoid it.